Correlation Between Home Depot and SPDR Portfolio
Can any of the company-specific risk be diversified away by investing in both Home Depot and SPDR Portfolio at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Home Depot and SPDR Portfolio into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and SPDR Portfolio Emerging, you can compare the effects of market volatilities on Home Depot and SPDR Portfolio and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Home Depot with a short position of SPDR Portfolio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and SPDR Portfolio.
Diversification Opportunities for Home Depot and SPDR Portfolio
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Home and SPDR is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and SPDR Portfolio Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Portfolio Emerging and Home Depot is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Home Depot are associated (or correlated) with SPDR Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Portfolio Emerging has no effect on the direction of Home Depot i.e., Home Depot and SPDR Portfolio go up and down completely randomly.
Pair Corralation between Home Depot and SPDR Portfolio
Allowing for the 90-day total investment horizon Home Depot is expected to generate 1.46 times more return on investment than SPDR Portfolio. However, Home Depot is 1.46 times more volatile than SPDR Portfolio Emerging. It trades about 0.06 of its potential returns per unit of risk. SPDR Portfolio Emerging is currently generating about 0.05 per unit of risk. If you would invest 30,306 in Home Depot on August 27, 2024 and sell it today you would earn a total of 11,694 from holding Home Depot or generate 38.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Home Depot vs. SPDR Portfolio Emerging
Performance |
| Timeline |
| Home Depot |
| SPDR Portfolio Emerging |
Home Depot and SPDR Portfolio Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Depot and SPDR Portfolio
The main advantage of trading using opposite Home Depot and SPDR Portfolio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, SPDR Portfolio can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in SPDR Portfolio will offset losses from the drop in SPDR Portfolio's long position.The idea behind Home Depot and SPDR Portfolio Emerging pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| SPDR Portfolio vs. Invesco PureBeta MSCI | SPDR Portfolio vs. Aquagold International | SPDR Portfolio vs. Morningstar Unconstrained Allocation | SPDR Portfolio vs. High Yield Municipal Fund |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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